7 Real Estate Investing Predictions for 2022
COVID-19 is constantly changing due to the population, making it difficult for us to pursue these basic needs such as food and shelter.
But those needs must be met, and don’t let something like a devastating global pandemic thwart your plans to capitalize on the real estate investment opportunities that this plague – like any major one before it – unexpectedly reveals as society adapts .
Here are some predictions for 2022, however, as coronavirus variants continue to use the Greek alphabet as nomenclature for an endless hurricane season.
Image source: Getty Images.
1. Rising interest rates will cool the housing market
The US housing market closes a year in which house prices hit record highs month after month and sales hit their highest level in 15 years. But the Federal Reserve has announced rate hikes for the coming year, and while mortgage rates are not rising in step with Fed movements, the National Association of Realtors predicts the 30-year fixed-rate mortgage rate will rise to 3.5%.
That’s still pretty low, but an upward move will compound affordability issues that are already seeming to be dampening sales growth. Expect it to continue like this. Investors need to be aware that they may have fewer buyers for their properties.
2. Builders will have a good year
The Census Bureau just reported that November construction starts were at levels not seen since the 1970s, and permits – the first step in building and completing a home – continued to rise year over year. A great way for investors to participate in this boom is to buy shares in large construction companies like Consoles group and Lennar.
3. Single family homes remain an attractive place to invest
Much of the blame has been placed on institutional investors for helping to drive home home prices up, and much of that activity went into building single-family home portfolios (SFRs). In fact, the share of single-family home sales to investors rose to 18% last year, and most of that is expected to be converted into rental properties.
There are already major acquiring players in this area, such as American houses 4 rent and Invitation homes, and a new SFR Real Estate Investment Trust (REIT), which is a spin-off from the Black stone buy from Bluerock Residential Growth REIT that was just announced. In fact, these spin-off tariffs could at least be an interesting indicator of how SFR stocks will perform in the near future. “
4. Apartment buildings will remain strong, especially in the sunbelt and exurbs
Blackstone Acquires Bluerock for its 30 apartment buildings, most of which are in fast-growing Sun Belt markets such as Atlanta; Phoenix; Orlando Florida; Denver; and Austin, Texas. Meanwhile, the latest housing report from the Census Bureau shows that apartment buildings across the country are keeping pace with single-family homes and that large metropolitan areas are ceding significant market shares to smaller cities. Investors should consider looking for the best opportunities in these areas over the coming year.
5. Office properties will continue to stutter
The assumption that 2022 would be a rally year for office real estate has been pushed back by the rise in Omicron variants. Apple just said there is no set date for office workers to return and more companies are likely to follow suit.
In the meantime, the white lab coats room, AKA Life Sciences, will continue to be in demand – good for REITs like Alexandria real estate stocks, but for employees and their dependent landlords it will look again next year as if they will have to sit at home and wait.
6. Commercial real estate offers a wide range of growth opportunities
Industrial real estate – especially the bulk of it devoted to logistics – was and will perhaps be as hot as any other segment of commercial real estate easily accessible to ordinary investors. The dynamics driving the surge, including virtual shopping and e-commerce, and the supply chain problems that fuel the growth of “just in time” rather than “just in time” use of warehouses will last as long as the pandemic persist. REIT opportunities with the big players, such as Prologis, as well as last mile coastal specialists like Terreno real estate, are possibilities.
7. Metaverse real estate is getting more real
The many iterations of the metaverse include websites for buying, occupying, and renting virtual real estate, including the brand new MetaSpace Real Investment Trust (MREIT) that just popped up on a popular crypto trading platform. Keep an eye out for established virtual game players and newcomers, including traditional real estate and other equally non-virtual businesses, to continue exploring metaverse real estate opportunities and grow their investments in burgeoning virtual space. After all, virtual property is just as real as the cryptocurrency people spend on it.
The more things change, the more opportunities can arise
Real estate plays a vital role in any economy – good, bad, or infected – and that won’t change. Investors who pay attention to what is happening globally and how it is developing locally can benefit from the opportunities that arise. Buying the right publicly traded stocks at the right time will continue to be a great way to do so in the year ahead.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all reflect critically about investing and make decisions that will help us get smarter, happier, and richer.